Transcripts

Drug Makers Still Need Prescriptions For Blockbuster Drugs To Stay Alive

SUSIE GHARIB: Several major drug companies were in the spotlight today, reporting strong first quarter profits. Merck, Schering Plough and Eli Lilly were among the companies that beat expectations. But as Erika Miller reports, analysts still see challenges ahead for big pharma.

ERIKA MILLER, NIGHTLY BUSINESS REPORT CORRESPONDENT: Merck delighted investors by reporting a strong start to what is expected to be a strong year. The drug giant earned $0.78 in the first quarter -- up from $0.62 a year ago -- and soundly beat Wall Street`s target. Powering the gains was robust demand for Merck`s cholesterol and asthma medications. But what really ignited the stock today was an upbeat outlook for the rest of the year. Merck expects second quarter earnings will be at the high end of Wall Street`s range and it says full year profits should be in line with expectations. Still, analysts are concerned about the June patent expiration of the company`s biggest drug, Zocor. On top of that, there are ongoing legal battles related to Merck`s withdrawal of its painkiller Vioxx.

ALBERT RAUCH, PHARMACEUTICAL ANALYST, AG EDWARDS: They took some reserves for defending themselves, but they haven`t taken any reserves for any of the potential settlements that could go against them, so it could be substantial.

MILLER: Wall Street also cheered earnings from Schering-Plough. The drug maker earned $0.24 a share in the first quarter, nearly triple the year-ago number. Analysts were forecasting just $0.14.

RAUCH: Certainly, the big product that is really driving Schering- Plough`s earnings is their joint venture with Merck. That would be their Vytorin and Zetia products for high cholesterol. They`re growing very well. They`re capturing a lot of market share.

MILLER: The company didn`t provide any earnings targets, but says 2006 should be strong. The news wasn`t as optimistic from Eli Lilly. The company says second quarter sales are likely to be below Wall Street`s expectations, although its outlook for the full year is in line with most analyst`s forecasts. That news overshadowed solid first quarter earnings of $0.77 a share. It compares to $0.68 a year ago. Analysts were also disappointed by a 3 percent drop in Lilly`s best seller -- schizophrenia drug Zyprexa.

LES FUNTLEYDER, HEALTH CARE STRATEGIST, MILLER TABAK: We`ve got a lot of concerns about the deterioration of Zyprexa and we don`t see a lot of high powered growth, near-term, in their pipeline.

MILLER: Analysts say its clear major U.S. drug makers have made great strides in cost-cutting, but they say the major challenge for most companies is development of new blockbuster drugs to drive revenues. Erika Miller, NIGHTLY BUSINESS REPORT, New York.